Time for government to get out of flood insurance business

My take on the news

Posted
Wednesday, October 30, 2013 1:00 pm

Lonnie Barham

THE BIG PROBLEM WITH FLOOD INSURANCE: It’s wonderful living on or near the water in Rhode Island where the Bay’s and Rhode Island Sound’s beauty and serenity are virtually palpable. Unfortunately, changes to the nation’s flood insurance program have made that beauty and serenity far less attractive to many seaside homeowners. Complaints and concerns abound about the skyrocketing cost of flood insurance, which is required by law for mortgaged homes that lie in designated flood plains. While newly drawn flood maps have moved a few homes out of flood-prone areas, most waterside homes and those in close proximity have seen sharp increases in their flood insurance rates – in many cases, increases of triple, quadruple or more.

While the federal government seems unfazed by the ramifications of such insane increases in insurance costs, homeowners, real estate agents and local governments are highly concerned. Countless older homeowners, middle-income owners and young homebuyers will be hard-pressed to keep or purchase homes near the water. Making things worse, many homeowners who can’t afford the exorbitant but mandated flood insurance and are forced to sell their homes will not be able to sell them because potential buyers are frightened away by the insurance – where, in many cases, the monthly cost will almost equal the cost of the mortgage payment itself.

Is it fair? Two arguments are salient. One says that the huge increases are unfair since the homes were purchased by buyers unaware the federal government was subsidizing the cost of flood insurance or under the assumption such subsidies would continue and, more important, that seaside homeowners already pay far more than their fair share of taxes because of the greatly inflated assessed value of their properties. Homes of exactly the same size and quality on equally-sized lots that are only a block or two apart – some on the water and others 300 yards inland – are disparately taxed, with the waterfront homes usually taxed at double or triple the amount of those only a few hundred feet away.

The other pertinent argument says that it is unfair for homeowners in landlocked states like Kansas or South Dakota, or for those in towns far inland in states on the water – like Exeter, to have to pay higher taxes in order to subsidize homeowners who choose to live in dangerous areas where flood waters are likely to damage or destroy their homes. Folks who live in the mountains, deserts and on the rolling plains argue that they are unfairly paying for seaside residents to enjoy the beauty and serenity of the ocean.

Regardless which argument you support, perhaps it’s time for government to get out of the flood insurance business altogether and let the market determine rates. Government does very few things better than private industry. That’s why the Founding Fathers envisioned little more for the federal government than printing money and providing for the national defense – leaving most other responsibilities to the states and to the people. The federal government has already shown that it cannot properly run the NSA, the IRS or the Obamacare program. Why should Americans think it can efficiently or fairly run the nation’s flood insurance program?

ANOTHER “FAMILY NAME” RUNNING IN RHODE ISLAND: When will it stop? When will young adults with virtually zero experience decide they shouldn’t be running for statewide office in Rhode Island? When will voters say “enough is enough” at the ballot box and tell these neophytes that running simply on the strength of their family names and political connections is not good enough for our fiercely independent little state? When will we tell them that some government experience – especially at the local level – or some substantive and successful experience in private industry is required before they arrogantly presume to move almost straight from graduate school into the highest offices in Rhode Island?

First it was Clay Pell saying he may run for governor. Then, last Wednesday, we learned that Seth Magaziner, son of Ira Magaziner – the Rhode Islander who was a close political advisor to Bill and Hilary Clinton – has thrown his hat into the political arena running for general treasurer. In his video announcement of his candidacy, Magaziner used a picture of himself standing alongside former President Clinton and Hilary at a White House Christmas party. The young man is only three years out of graduate school with nothing of substance in his resume besides working for an investment company for a couple of years where he oversaw $100 million in investments. Hardly the background one would expect of a candidate for general treasurer, a position that oversees $7.6 billion – 76 times more than what Magaziner is so proud of.

It’s just another example of a silver-spoon candidate with no real experience running on the strength of his family name and his father’s political connections. He’s no Ernie Almonte. He’s not even a Frank Caprio.

TAVERAS AFRAID OF RAIMONDO’S FUNDRAISING: It appears that Providence Mayor Angel Taveras, candidate for governor in 2014, is afraid of General Treasure Gina Raimondo’s ability to raise campaign funds. Raimondo has over $2 million in her campaign chest while Taveras has only about $700,000. The seemingly desperate Taveras has now proposed that all gubernatorial candidates renounce any support from political action committees. Raimondo has the support of the PAC American LeadHERship, a group that is pushing for more women in elected offices. Taveras is playing such an obvious political card because he can’t raise even close to as much money as Raimondo can and he doesn’t yet have the support of major political action committees. So, of course, he wants other candidates to join him at the bottom of the campaign fundraising heap. In Taveras’ case, it is apparent that desperate times call for desperate measures.

RAIMONDO SHOULD TREAD LIGHTLY: General Treasurer Gina Raimondo, whose poll numbers and campaign chest seem to give her a distinct advantage over other likely gubernatorial candidates, has begun to show some chinks in her political armor. She has been excoriated by a union-sponsored “investigation” of her investment practices with the state’s $7.6 billion pension fund, primarily because of her investments in hedge funds and those funds’ extraordinarily high management fees. Now she has decided to divest the pension fund of all investments in gun companies, gun distributors and equity funds that have holdings in such companies – even companies whose primary products are hunting and sporting firearms.

Raimondo has already angered union members in Rhode Island because of her leadership on pension reform, a move that caused union members to lose COLAs and forced them into a pension system more beneficial to taxpayers. It was a good move on Raimondo’s part but, nevertheless, it will likely cost her thousands of votes in 2014. Raimondo can’t afford to lose the support of another major segment of the voting population. She should tread lightly when it comes to irking hunters, sport shooters and other law-abiding citizens who choose to exercise their Second Amendment rights to own and bear arms to protect their homes and loved ones. Divesting pension fund money from companies that make, distribute or invest in legitimate companies seems to be leading us down a slippery slope. What’s next? Could a future far-right treasurer divest funds from drug companies simply because they make birth control pills? Or, could a future far-left treasurer divest funds from General Dynamics-Electric Boat because it makes war ships? Yes, Raimondo’s divestment policy starts us down a very slippery slope.

QUOTE OF THE WEEK: Speaking of General Treasurer Gina Raimondo’s divesting the state pension fund of all investments in gun companies and related equity funds, gubernatorial candidate Kenneth Block said: “She is using pension assets to score political points and pander to certain constituencies. Whatever you think about gun control, this is the wrong approach. The Rhode Island treasurer’s office is getting involved in a public policy decision for which it has absolutely no authority.”

Block’s right. Raimondo needs to stick to her job and concentrate on getting the best return on our pension fund investments, not on polarizing issues that should be decided by the legislature – even if her misbegotten action might make her a more attractive candidate for governor to some Rhode Islanders.